Equinor retreats from frontier exploration in Norway’s Arctic

OSLO (Bloomberg) - Equinor will reduce its focus on the frontier areas of the Barents Sea in another blow to Norway’s ambition to build a new oil province in its Arctic region.

“Our focus going forward will be on the more prolific areas of the Barents Sea,” Tim Dodson, the company’s executive vice president for exploration, said in an interview on Tuesday. That means drilling near existing discoveries such as Johan Castberg and Wisting rather than riskier but potentially more rewarding targets, he said.

The oil industry’s excitement for the Barents Sea southeast, a new exploration area close to the maritime border with Russia, has been followed by disappointment as the first four wells there failed to come up with anything of note. The prospects had a smaller chance of succeeding than others in better known areas, but had high hopes attached to them because they were some of the biggest geological structures remaining off Norway.

Norway has been counting on discoveries in the Barents Sea to limit a decline in its petroleum production expected to start around the middle of the next decade. While the region remains the most promising in terms of estimated undiscovered oil and gas, big finds are critical to justify expensive developments in an area that lacks the energy infrastructure of the North Sea.

“It was always a frontier area, almost a virgin area; we sometimes forget that there was high geological risk on this,” Dodson said. “You can say disappointing, but you could also add the words ‘not surprising’ to that.”

Equinor, in which the Norwegian government owns 67%, has been the most active explorer in the Barents Sea in recent years. Another explorer in the region, Lundin Petroleum AB, has said it will reassess its interest in the entire area if no major discoveries are made by the end of next year.

The Barents Sea has only two fields in production, Snohvit and Goliat. Equinor’s Castberg will start producing in 2022, but final investment decisions have yet to be made for the most likely candidates for future projects, Lundin’s Alta and Equinor’s Wisting.

Dodson made his comments on the sidelines of Equinor’s annual Autumn Conference in Oslo, where CEO Eldar Saetre said in a speech that Norway’s oil and gas production is set to drop by more than half by 2050 even if all existing opportunities are seized and more discoveries are made.

Saetre’s forecast goes far beyond official prognoses from the Norwegian Petroleum Directorate, the industry regulator, which expects oil and gas production to be 12% lower in 2030 than 2018 after peaking locally in 2023. The Equinor CEO’s comments were meant as a counter-argument to politicians and climate activists who are advocating for a planned shutdown of Norway’s oil and gas industry.